It's red, clear and blue and confusing all over

January 09, 1994|By Michael Wines | Michael Wines,New York Times News Service

WASHINGTON -- It may not be immediately apparent to anyone who has not recently taken a close look at the pumps at filling stations, but since Jan. 1, the government has required that diesel fuel be sold in three colors.

The colors are part of a new effort by two federal agencies and Congress to clean the air and collect fuel taxes.

For the government, it is simpler. For everyone else, it is far more confusing.

Consider: Highway vehicles must burn expensive clear diesel, except for government cars and trucks, local buses and vehicles owned by disparate groups like aircraft museums, nonprofit schools and the American Red Cross. They may run on cheap diesel that is dyed red, but not blue diesel, which is even cheaper.

Farmers can buy blue diesel for their tractors and generators but must buy clear if their pickups use diesel. Truckers must run their rigs on low-polluting clear but can fill their refrigerated trailer units with less expensive but more polluting blue -- if they can find it, which they usually cannot.

Pleasure boaters must fill their diesel motors with clear, but charter boats can burn blue.

Home and apartment-building furnaces that run on diesel fuel oil can burn either red or blue. But not both at once. Making purple of the two is illegal under federal law.

The types of fuel are classified by the type of use, amount of sulfur emissions and tax category.

Clear diesel, having low sulfur and carrying the full tax, is for highway users and is the most expensive.

Blue diesel, which is lower in sulfur and tax exempt, is for use in commercial boats, trains or some farm equipment; it is the least expensive.

Falling in between is red diesel, which is high in sulfur, tax-free and meant for buses, government vehicles and off-road use.

Spot checks possible

This is not to be trifled with. Federal agents may thrust dipsticks into almost any storage tank or pump to ensure that the diesel in it is chromatically correct. Resisting an inspection can result in a $1,000 fine.

"It's complicated," David Morehead, a vice president of the Petroleum Marketers Association of America, said of the new hues. "It's almost like peeling an onion back layers and layers and finding layers you didn't know were there."

The shift to colored diesel fuel does not appear to be causing major headaches now, but it has come in two stages. The first transition began Oct. 1 and brought shortages of some types and storage problems that had truckers and marketers tearing their hair. Whether the future will bring more headaches remains a matter of some debate.

To be fair, it would be easier had the IRS and the Environmental Protection Agency not elected, more or less simultaneously but for very different reasons, to dye diesel fuel.

And it would be much easier were the fuel not diesel, a distillate burned by everything from trains to bulldozers and taxed at nearly as many rates.

It all began at the environmental agency, where regulators weresearching for a way to reduce emissions of sulfur particles by heavy trucks and buses. In 1990, the agency decided to require all diesel-powered highway vehicles to burn a special low-sulfur diesel fuel, and it gave refiners three years to gear up production.

To distinguish the new diesel, the EPA ordered refiners to inject a blue dye into all high-sulfur fuel, leaving the new, low-sulfur fuel clear.

By itself, that caused considerable turmoil when the new sulfur rules took effect. Wholesalers, retailers and even some consumers like farmers had to install new tanks and pumps to accommodate blue fuel.

Price jump

In some parts of the country, clear diesel, the only kind legal to burn on the road, was in such short supply that wholesale prices jumped as much as 30 cents a gallon in California, and up to 14 cents in the Midwest.

"We saw the markets really go crazy through October and November," said J. Scott Susich, general manager of Computer Petroleum Corp. of Minneapolis, which keeps an electronic records on fuel prices.

Meanwhile, Congress voted last summer to raise the tax on diesel by 4.3 cents, to 24.4 cents a gallon.

The IRS maintained that some people were already cheating on the diesel tax -- usually by selling tax-free fuel intended for buses or government vehicles to buyers as taxable fuel and pocketing the difference -- and said the cheating would mushroom unless something were done.

So Congress ordered petroleum terminals, the big tank farms that are connected by pipelines to oil refineries, to dye all tax-free diesel red. And as of Jan. 1, only red diesel could be sold without collecting the tax of 24.4 cents a gallon.

So the nation has a fuel that looks like America: red, clear and blue.

That has placed a burden on terminals and dealers who must install new, costly tanks and pumps for dyed fuels, or decide not to sell them.